Last time you applied for a credit card at a department store, odds are you got the thumbs up or down on the basis of a single number -- your credit score.
It influenced the rate you got on your mortgage, too, and the size of your monthly car payments. Derived by computer algorithm from your past financial record, the credit score has become three-digit shorthand for your future financial trustworthiness.
"Every second of the day, decisions are made for consumers based on their credit score," said Cameron King, senior vice president of Net-based lender E-Loan.
With that in mind, E-Loan recently began letting people check their credit scores for free online. It was the first time the data had been made freely available, and it was an immediate hit.
But once the new service went up, E-Loan quickly discovered something else about credit scores: The folks who tally the numbers don't want consumers to see them.
Last Monday, Equifax, the credit repository that supplies credit scores to E-Loan, abruptly cut off E-loan's data flow.
Equifax didn't just turn off E-Loan's tap. It also cut off the technology middle-man, Credit InfoNet, which distributes the data. Nevermind that Credit InfoNet has hundreds of other customers, all of whom were suddenly without service.
Equifax, in turn, was apparently pushed to drastic action by Fair, Isaac, the company whose software algorithm gins up the credit scores -- FICO scores in industry-speak, for Fair, Isaac Company.
"The powers that think they own the consumer credit reporting industry chopped us down without any justification," fumed Credit InfoNet CEO Thomas Midkiff. "These guys feel like they own the industry, and without any due process they can destroy my business."
E-Loan, meanwhile, switched distributors, brought the credit-score service back up, and promises to keep it up. E-Loan won't disclose the name of the new distributor for fear of reprisals from the industry.
"The consumer needs to know and understand credit scores and how they affect decisions that are made about him," King said. "It's un-American to keep secret dossiers of information about people."
So why do the credit scorers want their tallies kept secret?
According to a statement from Fair, Isaac, the answer is simple: Consumers won't understand what the numbers mean.
"Fair, Isaac's view is that consumers need additional information and individual counsel from a lender to truly understand their credit standing and how to improve it in the eyes of the lender," wrote Craig Watts, the company's consumer affairs Manager.
"For that reason, the contracts between Fair, Isaac and credit reporting agencies prohibit the disclosure of credit risk scores to consumers outside of the context of a lender's explanation of a credit decision."
For it's part, Equifax said it was just enforcing the terms of its contract with Fair, Isaac.
Consumer advocates are unimpressed.
"Fair, Isaac thinks they're the high priests of people getting credit," said Ed Mierzwinski, consumer program director at U.S. Public Interest Research Groups, a nonprofit advocacy organization. "The score is not proprietary. If the lenders see it, you should see it. It should be disclosed under law."
Mierzwinski plans to contact both the FTC and Congress to urge an investigation into whether it's possible Fair, Isaac and Equifax violated fair trade laws.
Nonetheless, Mierzwinski and other critics agree with Fair, Isaac's argument that the algorithm that produces the credit score is confusing. That means people will ask questions, and if people ask questions, Fair, Isaac will have to answer them, and that would be an enormous, expensive pain in the neck.
Moreover, if Fair, Isaac had to explain exactly how it scores people, potential competitors might be able to produce a competing product, breaking Fair, Isaac's lock on the market, said E-Loan's King.
Pressure to keep the information under wraps also comes from lenders, said Norm Magnuson, vice president of public affairs at Associated Credit Bureaus Inc., a credit industry trade group.
"The issue is one of how do (lenders) adequately explain to consumers what the score entails without divulging proprietary issues?" he said. "If they do that, they're exposing their underwriting criteria. They're telling their competitors what their underwriting criteria are."
Having business incentive to keep the credit scores secret does not give Fair, Isaac or Equifax the legal right to suppress their exposure, critics contend. It's not illegal to make credit scores available, and using market clout to suppress them may be a violation of anti-trust law, Mierzwinski said.
When asked if he feared continued reprisals from Fair, Isaac, King said, "Doesn't that sound a little bit like a fair trade issue?"
Besides, he said, resistance is futile. E-Loan can hop between providers faster than Fair, Isaac can keep up.
"It'd be a little like trying to hold back the tide," he said. "Once this blows over, others will do it too, and that's a great thing for consumers."
